The Formation of a Restaurant as a Legal Entity

15 Min Read By Julian A. Fortuna and Jonathan B. Wilson

According to the National Restaurant Association, among the more than one million restaurant locations in the United States:

• 7 in 10: Restaurants are single-unit operations.

• 8 in 10: Restaurant owners started their careers in entry-level positions.

• 9 in 10: Restaurant managers started their careers at entry level positions.

Each new restaurant opening creates opportunities for founders, investors and managers who should discuss various important matters with the lawyers, accountants and other professional advisors. Decisions that need to be made upon the formation of restaurant industry business include selection and formation of legal entity, financing, governance and insurance.

As with any other business start-up, a key question is what kind of entity to form. There are basically three choices:

(1) a corporation,

(2) a partnership, or

(3) a limited liability company.

A corporation allows the founders of the business to own shares in the corporation with no personal…